Fed keeps interest rates on hold

Alan Greenspan is keeping his eye on the economic recovery

The Federal Reserve has voted to keep US interest rates on hold for another month - the seventh in succession.

Analysts say the expected decision to maintain the basic rate at 1% was further strengthened by Wednesday's flat monthly factory order figures.

The data showed that US manufacturing output remained static during December, rather than the predicted rise.

Despite the recent weakening of the dollar, the Fed has decided to keep its eye on aiding the economic recovery.

Balancing act

In its statement, the Federal Open Market Committee (FOMC) said its decision was unanimous, and it vowed to be "patient" before voting for any future rise.

"With inflation quite low and resource use slack, the committee believes that it can be patient in removing its policy accommodation," it said.

Previously the committee, led by Alan Greenspan, had said it would keep interest rates low for a "considerable period", a phrase it had been using since last August.

Some analysts said the subtle change in the terminology made a rise now more likely over the coming months.

They say that with the US economy continuing to recover, the Fed can soon turn its attention to aiding the dollar.

Alfred Kugel, senior investment strategist at Stein Roe, said the new wording suggested that the time before an interest rate hike now "might not be so considerable".

Historic low

Yet others predicted that interest rates could now stay at 1% for the whole of 2004.

The FOMC added: "The committee perceives that the upside and downside risks to the attainment of sustainable growth for the next few quarters are roughly equal."

US interest rates have now remained unchanged from their 1958 low since June 2003.